Then he was told by the bank that he could stop the theft only by closing his account and opening a new one — an enormous hassle, he said. And finally, JPMorgan Chase told him that the bank would cover only $50,000 of his losses.

“While this is an unfortunate situation, we believe our response has been entirely appropriate,” said Mary Sedarat, a spokeswoman for the private banking service at JPMorgan Chase.

Mr. Wyser-Pratte emphatically disagrees. “They never should have approved that first transfer,” he said.

The wealthy financier “is getting a taste of what the rest of us have to deal with all the time,” said Gail Hillebrand, the senior staff lawyer for Consumers Union in San Francisco.

That sour taste is called automated clearing house fraud, theft involving unauthorized electronic transfers through the automated networks of the circulatory systems that connect the world’s bank accounts.

When a consumer writes a check, the merchant that accepts it is entitled to have the specified amount taken from the customer’s bank account and sent electronically to the merchant’s account.

But once someone has certain routing numbers for a customer’s account, fraudulent transfers become possible unless the customer carefully scrutinizes all of the transactions on the monthly account statement.

If the consumer reports a clearly unauthorized transaction within 60 days, federal banking rules require the bank to cover the loss, Ms. Hillebrand said. If not, and if the bank informed the customer in advance about the 60-day deadline, the bank has no liability. ....

re:
http://www.garlic.com/~lynn/2008n.html#0

business news show this morning are wringing hands about gov. negotiations for Lehman bailout ... claiming that Lehman had 6months after Bear bail-out to get house in order. Since they didn't ... this is starting to look more and more like "moral hazard" .... no consequences and accountability for risky behavior resulting in increasing risky behavior, another kind of play on the peter pan reference at financial cryptography blog, never having to grow up and face consequence, aka treating financial industry executives as if they are minors and not adults